With the increasing commercialization of the Internet, methods of performing payment transactions are becoming well known and new payment methods are desired. In an effort to expand the available sources of payment, methods have been developed to utilize checking account funds to perform Internet transactions.
A first conventional method uses “electronic checks” to perform transactions. One example of such an electronic check is the “e-check” process an established by the Financial Services Technology Consortium (FSTC). Prior art FIG. 1a illustrates the system and flow of information used in performing an e-check Internet transaction. In order to participate in an e-check Internet transaction, all of the participants possess the enabling software. Utilizing a processor with a modem 10, the customer sends customer payment instructions 1 over the Internet 11 to a merchant's Internet terminal 12. The merchant's terminal 12 attaches the merchant's payment instructions and forms a data message having both the customer's and the merchant's payment instructions 2. The data message 2 is transmitted over the Internet to the merchant's financial institution server 18 where the server reads the data message and begins settlement procedures with the customer's financial institution 16 over the automated clearing house (ACH) network or electronic check processing, (ECP) network using ACH or ECP formatted instructions 3. Since the merchant's financial institution is initiating the ACH or ECP process, the ACH or ECP instructions 3 are in the form of an ACH or ECP debit request.
There are a number of problems, however, associated with current electronic check methods. For example, there is a delay between the time that the merchant is notified that the e-check has been returned. This delay may be three or more days. As a result, the merchant typically must wait a number of days to find out whether or not the funds are good, thereby delaying fulfillment of the order. As such, utilizing this type of electronic check creates uncertainty for the merchant, as they are unsure if the electronic check will be paid. Thus, despite the transaction having the appearance to the customer of being on-line and real-time, it takes several days for the merchant's account to be charged and for the transaction to be completely processed.
Even taking into account the delays associated with the e-check payment process, it is still an extremely useful and viable payment method for many types of goods and/or services but, for a consumer to be able to use this type of e-check, the consumer must be a member of a financial institution or financial institution that offers this service. Over the next 5 to 10 years, however, only a few dozen financial institutions are estimated to participate in issuing electronic checks. Because of this limited participation, the majority of customers will not have access to e-checks from the financial institution with whom they have an account relationship. Thus, in turn, the number of customers that a merchant can attract and serve with an electronic check is limited.
Additionally, for example, not only must the customer be a member of a participating financial institution, but the merchant must set up procedures for these types of transactions to deal with the limited number of participating financial institutions. Due to the limited number of customers who would utilize this payment method, a merchant may be discouraged from expending the time and money to establish such a system.
A second conventional payment system and method as shown in FIG. 1b begins with the customer modem 10 sending customer payment instructions 1 over the Internet 11 to a merchant's Internet terminal 12. The merchant's terminal 1210 attaches the merchant's payment instructions and forms a data message having both the customer's and the merchant's payment instructions 2. The data message 2 is transmitted over the Internet to the customer's financial institution server 16 where the server reads the data message and begins settlement procedures with the merchant's financial institution 18 over the automated clearing house (ACH) network using ACH formatted instructions 3. Since the customer's financial institution is initiating the ACH or ECP process, the ACH instructions 3 are in the form of an ACH credit. An ACH credit is guaranteed since it is issued by the authorizing financial institution. While this method solves the problem of on-line notification to the merchant that the customer has the funds, the method still requires that at least the customer, merchant and the customer's financial institution be equipped to handle Internet formatted transactions and instructions. This is extremely costly due the stringent hardware and software requirements.
In a third conventional payment system, the customer, likely for security reasons, does not choose to have the customer payment instructions go through the merchant. In FIG. 1c, the customer modem 10 directs the customer payment instructions to the customer financial institution 16 via the Internet 11. At this point, the customer's financial institution may hide or encrypt the customer's financial information such that it is recognizable only to them or the customer's financial institution removes the customer's information altogether. Along with authorization, the customer's financial institution sends a data message 5 to the merchant terminal via the Internet. After receipt of the data message 5 the merchant may currently process the payment as shown in FIG. 1a or 1b. As discussed with reference to the conventional payment methods described above, this payment flow requires that at least the customer, the merchant, and the customer's financial institution be equipped to receive and process Internet formatted transaction requests.
Currently, there is a need for low-cost access to various individual and business accounts held by customers and merchants at multiple financial institutions, to perform financial transactions over the Internet. Most customers access the Internet from remote locations, such as personal computers at home or at a business. Further, many financial institutions, though accessible through networks such as automated teller machine (ATM), ACH, ECP, are not accessible on-line and in real-time by Internet customers and/or merchants wishing to utilize their accounts held within the financial institutions. Finally, the time and expense necessary to put an on-line, realtime payment system into place is currently too great for the majority of financial institutions.